We talk to our client Equitix about driving climate-resilient investment strategies

Jim Fitzgerald, Director at Baringa

Hi, I'm Jim Fitzgerald, I'm a director at Baringa and today we've got the privilege of speaking with Charlotte Whittlesea from the Sustainability and ESG team at Equitix.

Equitix is a leading international investor, developer and fund manager in infrastructure, established in 2007 with over 300 assets under management valued at over £11 billion.

They bring deep investment and operating expertise across sectors to create value for their investors. Responsible investing has always been at the heart of Equitix’s approach to investing in critical infrastructure. They integrate the consideration of material sustainability, including climate related factors throughout the investment process and ongoing investment management period.

So today I would like to introduce you to Charlotte, welcome to Baringa.

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

Hi, Jim. Really great to be here.

Jim Fitzgerald, Director at Baringa

So to kick us off, could you tell us some of the key drivers behind Equitix’s decision to understand climate related risks and opportunities in more detail?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

So, at Equitix we wanted to develop a deep understanding of transition risk and opportunity. We're really interested in the operational financial implications that transition risk could pose to our investments. So we want to focus on what's material to the investments, whether that be emerging value drivers or risk mitigations. We're also seeing increased expectations from our fund investors around robust climate risk management processes.

We're also looking to regulation, and disclosures are becoming much more revolved around accountability and transparency. So based on what we're seeing at the asset level, but also based on demands from our fund investors and regulators, we're looking to integrate these considerations across the investment lifecycle.

Jim Fitzgerald, Director at Baringa

What challenges were Equitix facing that meant you needed to understand climate related risks and opportunities in more detail and why was now the time to act on those?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

Climate risk is an inherent consideration to infrastructure investors like Equitix. Infrastructure is a real asset. It's fixed, it's long lived and it's essential to the functioning of society. So our initial portfolio wide assessment identified key hotspots of transition implications. But we wanted to move from these broader level insights to a more materiality based approach.

Jim Fitzgerald, Director at Baringa

So to move from the more broad view of materiality, how did you then identify the challenge of going into the deep dives on individual sectors and assets?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

To address this, we partnered with Baringa and we conducted a deep dive across four portfolio assets, that were considered exposed to carbon intensive activities, whether that be directly or indirectly. We analysed key transition drivers like policy, consumer and technology to really understand what risks and opportunities could be faced by these investments in the long term.

I think the overall use case for this was to make sure that the data was useful for asset management processes, and monitoring as well.

Jim Fitzgerald, Director at Baringa

So how does this work align with the expectations of Equitix's key stakeholders?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

This project is really aligned with their expectations primarily for our fund investors. They're increasingly looking for information regarding where their investments are positioned in the climate transition.

We're now able to deliver forward looking insights with more confidence and clarity. From a regulatory perspective, there are increased disclosure requirements around climate related reporting.

So to note, that was a recent announcement regarding mandatory transition planning by the UK government under their Sustainable Finance Policy Framework. For our asset directors, as mentioned, they're able to more strategically drive engagement with the investee companies.

And for the investee companies, it's about capability building so they can better understand their exposure and be proactive towards climate risks.

Jim Fitzgerald, Director at Baringa

So, what made Baringa the right partner for this piece of work?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

We needed a partner with deep climate expertise, strong sector level understanding, but also access to high quality data to inform a credible scenario analysis. So we wanted to focus on the operational realities of our investments, and we didn't want to just generate theoretical models.

What we found was particularly useful was Baringa’s collaborative approach. So Baringa engaged with the asset directors to help ensure that the outputs and the methodology were grounded in reality.

Jim Fitzgerald, Director at Baringa

How did Baringa’s methodologies stand out during the process?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

Beyond the modelling, Baringa was able to navigate the uncertainties and complexities of climate scenarios, whether that be policy changes or technology shifts, and translate that into structured outputs, and we found that really valuable.

Jim Fitzgerald, Director at Baringa

How will the outcomes of the assessment be integrated into Equitix’s investment and asset management processes?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

At Equitix, we integrate climate risk and opportunity across the investment lifecycle. So during our investment processes, we have a physical and transition risk screening section. And with this assessment we're going to look to extrapolate these sector level learnings into our due diligence processes.

So across our existing investments, asset directors are able to more meaningfully engage on climate data with our investee assets, but also using this data to shape transition planning in line with the transition plan task force framework.

Ultimately, it feeds into our responsible investment approach, enabling teams to engage more effectively with our underlying investments and shape climate strategy.

Jim Fitzgerald, Director at Baringa

So what advice would you give to others considering similar work?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

So I'd start by grounding the analysis in what's material by sector, by size or by jurisdiction to the asset that you're invested in. Also we want these assessments to be grounded in reality, so early engagement with either the investee management teams or the asset directors is really important.

Jim Fitzgerald, Director at Baringa

So how can we use this work to inform future decision making?

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

This assessment has set the foundation for transition planning with our asset directors. So we've already built on this through asset director training, using various workshops and templates to build transition risk and opportunity for understanding at a board level.

So by grounding our approach in operational realities, we're not just meeting regulatory expectations, we're shaping industry best practice across the sector.

Jim Fitzgerald, Director at Baringa

Thank you very much for coming in to share your insights from the work. We look forward to working together with Equitix in the future and collaborating on future projects. Thank you for your time.

Charlotte Whittlesea, ESG and Sustainability Associate at Equitix

Great, and thank you very much for the opportunity.